Perfect Storm?

Forum|Forum|6 years ago
March 18, 2020
1 reply
7 views

I changed my withholding last year to Single 0, My wife changed her's to Married 0 -- Because we got hit with a 1,600.00 owe for both Federal and State. In the past, we usually got a refund. This year it jumped to 4,674? -- we just don't have that kind of cash available to meet this obligation. Did I do something wrong, seems like a big hit. The only thing I can think of it my soon to be 21 year old son, we no longer can claim as a dependant. My 23 year old daughter recently graduated from college in June and got married in August, we no longer can claim her or get the tuition credit. In addition, I received just over 4,000 from a retirement plan. Our income and adjustments were 153,759 taxable 129,359. Hard to believe we still owe so much. Any ideas or suggestions?

Tax Advice

Best answer by AmyC

To clarify, friends with businesses write things off on their sch C or business return. 95% of America is using the new standard deduction. If your itemized deductions are higher, you should be using them.

Yes, the perfect storm. When things swapped over to the increased standard deduction, the W4 charts changed and everybody got bigger paychecks. That change in the W4 chart, did not help you. Your tax bracket did not change between the 2 years.

You should be gathering all income and checking federal withholding every 3 months when things are so turbulent. Adjusting your W4 to compensate for the changes throughout the year as needed.

I recommend using:

Congratulations on all the positive life events!

MinhT1

Level 15

It is very hard to explain the reason for this amount of tax due without actually looking at your return and your tax forms (W-2s, 1099-R, etc...).

One reason would be the tax (and eventually the early withdrawal penalty) on your retirement plan distribution if no tax was withheld.

If you are using TurboTax Online, you add TurboTax Live to have a tax professional review your return before filing.

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JlholzhaeAuthor

Level 2

Just as I thought -- "The Perfect Storm", I'm been teaching high school for over 25 years -- No breaks for me (not being able to itemize or take advantage of any exemptions), with the new tax law. My kids are grown now and we have no other exclusions nor deductions. I guess I needed to hire a tax accountant to maneuver through this, or start a business where I can exarate expenses and deductions.

Counted on Turbo Tax for many year and have been pleased with it, only to be blindsided in 2019. As a result we changed our withholdings, only to be devastated in 2020. Why do I need a tax accountant to take care of this? I'm fine with paying my fair share -- but this is too much. I have friends who are in business and can itemize, they joke about how much they can deduct, while I get the Standard Deduction, which is far less than my itemized deductions in past years. How is this fair? I work just as hard and so does my wife, what is fair?

AmyCAnswer

Level 15

You should be gathering all income and checking federal withholding every 3 months when things are so turbulent. Adjusting your W4 to compensate for the changes throughout the year as needed.

I recommend using:

Congratulations on all the positive life events!

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"